The Economics and Regulation of Financial Privacy - A Comparative Analysis of the United States and Europe

Abstract:     
This paper analyzes the economics and regulation of financial privacy. Financial intermediaries produce and process vast amounts of personal information, therefore, the primary focus is on information sharing arrangements among market participants in consumer credit markets. The examination serves two interrelated purposes. First, it reviews canonical credit market models and discusses the implications for privacy formalization. Second, it provides a comparative analysis of information sharing arrangements and privacy regulation in the United States and in Europe. The intention is to answer the question of whether or not financial privacy is more strictly regulated in Europe than in the United States. In comparing the property rights structures established by both regulatory regimes we find differences in the initial assignment of rights, these differences, however, vanish when bank lending practices are taken into account.

Keywords: Information Economics, Privacy, Credit Markets, Credit Bureaus

JEL Classifications: G28, G21, D82

Working Paper Series